Analysts react to BOJ decision to keep rates steady
EWJ•The Bank of Japan held its short-term policy rate at 1.25% in an 8-1 vote, raised its inflation forecast and revised the pace of its ETF sales. Analysts said the inflation assessment strengthened the case for future rate hikes, while the ETF unwind is expected to take 43 years.
1. Rate decision and outlook
The Bank of Japan kept its short-term policy target at 1.25% on Friday in an 8-1 vote, with board member Hajime Takata dissenting. The central bank revised up its inflation forecast and said underlying inflation had reached a level generally consistent with its 2% price stability target.
2. ETF sales draw attention
Analysts said the BOJ’s accelerated ETF sales were a surprise, but assessed their likely market impact as limited. The revised pace means the disposal of its ETF holdings is expected to take 43 years, with annual sales amounting to around 0.1% of market turnover, according to Masahiko Loo of State Street Investment Management.
3. Analysts assess rate path
Analysts differed on the decision’s policy signal. Some said the updated inflation assessment strengthened the BOJ’s rate-hike bias and could point toward a December hike, while others said the wording and single dissent conveyed a less hawkish stance and left the central bank under no pressure to rush.
